CH 12 IMS

strategic alliance

a voluntary agreement of cooperation between firms

contractual (nonequity based) alliance

alliance between firms that is based on contracts and does not involve the sharing of ownershup

equity based alliance

alliance based on ownership or financial interest between the firms

strategic investment

one firm investing in another as a strategic investor

cross shareholding

both firms investing in each other to become cross shareholders

acquisition

a transfer of control of operations and management from one firm (target) to another (acquirer), the former becoming a unit of the latter

merger

the combination of operations and management of two firms to establish a new legal entity

due diligence

investigation prior to signing contracts

real option

an investment in real operations as opposed to financial capital

learning race

a race in which partners aim to outrun each other by learning the “tricks” from the other side as fast as possible

relational (collaborative) capability

ability to manage interfirm relationships

acquisition premium

the difference between the acquisition price and the market value of target firms

strategic fit

the effective matching of complementary strategic capabilities

organizational fit

the similarity in cultures, systems, and structures

learning by doing

a way of learning, not by reading books, but by engaging in hands on activities

hubris

overconfidence in one’s capabilities

managerial motive

managers desire for power, prestige, and money, which may lead to decisions that do not benefit the firm overall in the long run